3rd September 2019 Market Update
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🇬🇧 GBP – Sterling has hit its lowest level against the US Dollar in two years this morning ahead of a key day in Parliament. Opponents of a no deal Brexit will attempt to take control of the Parliamentary agenda that would mean a law is passed to delay Britain’s exit for a further 3 months. Johnson responded yesterday by hinting that an election may be called if he is defeated which raises the stakes further. This level of uncertainty has resulted in widespread selling of the Pound which traders are expecting to continue.
The Pound will remain volatile throughout the course of today and this week due to the number of outcomes from today’s vote. There certainly seems to be room for the Pound to drop further but markets may take some heart if the cliff edge on October 31st is averted for now. Additionally, there are separate challenges of the plan to prorogue Parliament going through English and Scottish courts today. On the data front, a slightly improved Construction section PMI reading is unlikely to pull away too much attention from political risk.
🇪🇺 EUR – The Euro also suffered on Monday as the impact of the US and China trade war on the European economy becomes clear. Germany’s manufacturing sector remained in contractionary territory last month due to falling demand from export partners leading to companies cutting staff and production. The chance of an interest rate cut from the ECB later this month has risen and caused the single currency to fall to a 16 month low.
Today sees a lack of data being released from the Eurozone which is unlikely to help the Euro recover any lost ground. The Euro is set to benefit from Sterling weakness but is likely to struggle against its other major pairs.
🇺🇸 USD – US financial markets were closed for Labor Day yesterday which meant that there were no economic data releases. However, with weakness in other major currencies, the US Dollar index was able to gain by just over 0.2%, moving it to over 99. Typically, the Fed is uncomfortable with the US Dollar index being over 100 but they may struggle to weaken their currency given the current global outlook.
Manufacturing results will be published today with both measures expected to be very close to the previous reading. If this transpires, analysts are unlikely to react too strongly but the US Dollar could still gain further ground in a similar fashion to yesterday’s movements.
GBP: Pound falls to two year lows
EUR: Single currency suffers from manufacturing slowdown in Germany
USD: Greenback benefits from weakness in other currencies
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